Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q₁ by which the: A)marginal benefit of this public good is less than the marginal cost. B)total benefit of this public good is less than the total cost. C)marginal benefit of this public good is greater than the marginal cost. D)total benefit of this public good is greater than the total cost.

Question

Quizplus · Accepted Answer

Line segment ad represents a point on the demand curve where the marginal benefit of the public good is equal to the marginal cost. Since the point is to the right of the intersection of supply and demand curves, it means that the marginal benefit of the public good is greater than the marginal cost, indicating that more of the public good should be produced to achieve maximum social welfare. Thus, option C is the best choice.

Refer to the Supply and Demand Graph for a Public